A Large Population Approach to Implementing Efficiency with Minimum Inequality

Sarvesh Bandhu and Ratul Lahkar
Additional contact information
Sarvesh Bandhu: Indian Institute of Management, Bangalore
Ratul Lahkar: Ashoka University

No 76, Working Papers from Ashoka University, Department of Economics

Abstract: We consider the implementation of efficiency with minimum inequality in a large population model of negative externalities. Formally, the model is one of tragedy of the commons with the aggregate strategy at the efficient state being lower than at the Nash equilibrium. A planner can restore efficiency by imposing an externality equivalent tax and then redistribute the tax revenue as transfers to lower inequality. We characterize the transfer vector that minimizes inequality at the efficient state subject to incentive compatibility and budget balance. We then construct a mechanism that implements efficiency with minimum inequality in dominant strategies. We also show that minimizing inequality at the efficient state maximizes the minimum payoff at efficiency. But it is not equivalent to implementing the Rawlsian social choice function.

Pages: 28
Date: 2022-03-15
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://dp.ashoka.edu.in/ash/wpaper/paper76_0.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ash:wpaper:76

Access Statistics for this paper

More papers in Working Papers from Ashoka University, Department of Economics
Bibliographic data for series maintained by Ashoka University ().